What China’s economic troubles mean for the world

What happens in the world’s second-largest economy matters everywhere else. Because China is so big, its changing economic fortunes can drive overall global growth figures. But a slowing China also directly affects other countries’ prospects. Its households and companies will buy fewer goods and services than they would have otherwise, with consequences both for the producers of these goods and the other consumers of them. In some places, China’s difficulties will be a source of pain.

Weak spots in the West include Germany . Faltering demand from China is one reason why the country’s economy has stagnated of late. And some Western firms are exposed through their reliance on the country for revenues. In 2021 the 200 biggest multinationals in America, Europe and Japan made 13% of their sales in China, earning $700bn. Tesla is more exposed still, making around a fifth of its sales in China; Qualcomm, a chipmaker, makes a staggering two-thirds.

Moreover, China’s struggles come at a time when the rest of the world is doing better than expected. In July therevised its forecast for global growth, compared with its projections in April. Most notable has been the rude health of the world’s biggest importer, America, which some surveys suggest is growing at the red-hot pace of nearly 5%.

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